Ikea CEO: We're Buying American Due to Weak Dollar

CNBC.com

Monday, 14 Apr 2008 | 8:13 AM ETCNBC.com

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The sinking U.S. dollar has boosted the competitiveness of American-made goods, prompting furniture chain Ikea to rethink how it sources the parts for its products, its chief executive told CNBC Monday.

"We are now starting to source more in the US from US manufacturers, because now even manufacturing in the US is becoming competitive from a global perspective because of the weak dollar," Ikea CEO and President Andres Dahlvig said.

Demand for the company's low-cost furniture has been hit hard by the slowdown in the company's key markets of the US, UK and Germany, as home sales slump across the globe.

"We've seen a slowdown in our sales in the U.S. for quite a while," Dahlvig said.

"Some of the markets in Western Europe are still holding up very well," Dahlvig said. "What’s hitting us is the slowdown in big markets."

"This downturn in the economy has some new ingredients compared to the last one in the sense that we see rising costs in the salary costs we also see rising raw material prices, which has an affect on our margins and we also have a slowdown in the consumption," he said. "So the combination of all those three makes this a very challenging retail climate."

High inflation in Europe has hiked costs of the group's materials at a time when consumers will be moving to discount retailers. But Ikea's scale could help it take market share from smaller rivals by taking a hit to the bottom line to maintain competitive prices.